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ABI GEONEWS: PHOENIX MSA - SELECT NEWS CONTINUED ON PAGE 06

POPULATIONCENSUS

4,857,962

UNDER CONSTRUCTIONYARDI

TOTAL INVENTORYAS OF MAY 2020 - YARDI

19,730Units (50+)

335,006Units (10+)

2.7%

UNEMPLOYMENTQ-O-Q AS OF MAR 2020 - BLS

4.7%

EMPLOYMENT GROWTHY-O-Y AS OF MAR 2020 - BLS

MEDIAN HH INCOMECENSUS

$64,427 $32,482

PER CAPITA INCOMECENSUS

ABI in the News: How the Coronavirus Is Slowing Phoenix Metro

23-Story High-Rise Planned for Downtown Phoenix 'Opportunity Zone'

Nacero $3B Casa Grande Plant Will Create 2,000 Construction Jobs

AV

ER

AG

E

10+ UNIT PROPERTIES

Total Sales Volume

Price/Unit

Price/SF

Year Built

Units Delivered

Average Rent

Q1 2020

$1.39B

$173,786

$215.03

1983

1,399

$1,235

95.1%

Q1 2019

$2.15B

$150,153

$177.11

1984

2,587

$1,141

95.5% Occupancy Rate

INCREASE/DECREASE

+0.7%

-45.9%

-0.4%

+8.2%

-1 Yr

+21.4%

+15.7%

-35.2%

PHOENIX MSA OVERVIEW 01

PHOENIX MSA - PER CITY ANALYSIS 02

MULTIFAMILY PROPERTY ANALYSIS: 100+ & 10-99 UNITS 03

ARIZONA MOBILE / MANUFACTURED HOUSING PARK (MHP) ANALYSIS 04

COMPLETED CONSTRUCTION & PLANNED PROJECTS 05

ABI GEONEWS: PHOENIX MSA - SELECT NEWS 06

THE MULTIFAMILY MARKET & INITIAL REPERCUSSIONS OF COVID-19 07-08

PHOENIX MSA | MULTIFAMILY | Q1 2020 REPORT

ABIMultifamily.com Phoenix Headquarters: 5227 North 7th Street, Phoenix, AZ 85014 Tel: 602.714.1400

PHOENIX MSA - PER CITY ANALYSIS

Phoenix Mesa Scottsdale Tempe Glendale

Average Rent (Q1 2020) $1,141 $1,103 $1,592 $1,426 $1,046

% Change (y-o-y) +9.0% +8.9% +7.6% +7.0% +8.6%

Occupancy Rate (Q1 2020) 94.7% 96.0% 95.9% 95.0% 94.9%

% Change (y-o-y) -0.6% -0.2% +0.1% -0.1% -0.5%

Units Delivered (Q4 2020, 50+) 258 346 -- 259 53

PHOENIX MSA - PER CITY ANALYSIS

Total Sales Volume (Q1 2020, 100+) $535,175,000 $62,600,000 $19,000,000 $296,661,111 $60,206,000

Total Sales Volume (Q1 2019, 100+) $783,230,000 $215,950,000 $185,300,000 $249,125,000 $172,320,000

% Change (y-o-y) -31.7% -71.0% -89.7% +19.1% -65.1%

Avg P/U (Q1 2020, 100+) $170,928 $136,087 $172,727 $212,813 $138,724

Avg P/U (Q1 2019, 100+) $145,609 $124,827 $290,437 $179,098 $107,767

% Change (y-o-y) +17.4% +9.0% -40.5% +18.8% +28.7%

Total Sales Volume (Q1 2020, 10-99) $98,690,000 $55,228,450 $4,000,000 $20,500,000 $900,000

Total Sales Volume (Q1 2019, 10-99) $91,749,295 $8,728,000 $6,151,000 $7,335,000 $6,035,000

% Change (y-o-y) +7.6% +532.8% -35.0% +179.5% -85.1%

Avg P/U (Q1 2020, 10-99) $131,062 $162,916 $166,667 $227,778 $90,000

Avg P/U (Q1 2019, 10-99) $113,974 $136,375 $157,718 $112,846 $61,582

% Change (y-o-y) +15.0% +19.5% +5.7% +101.8% +46.1%

Phoenix MSA

Phoenix

Mesa

Scottsdale

Tempe

Glendale

$64,427

$61,506

$48,259

$72,455

$51,829

$49,383

$32,482

$31,096

$26,535

$56,794

$27,705

$24,586

19,730

7,094

1,140

1,964

3,070

553

310,916

139,317

38,658

28,657

34,726

24,528

PHOENIX MSA QUICK STATS UNEMPLOYMENT RATE MEDIAN HH INCOME PER CAPITA INCOME UNDER CONSTRUCTIONTOTAL INVENTORY

50+

4.7%

5.0%

4.1%

3.4%

3.8%

4.3%

RENT

& O

CCUP

ANCY

STAT

SSA

LES D

ATA

(100

+)SA

LES D

ATA

(10-

99)

ABIMultifamily.com02 Phoenix MSA Q1 2020 Report

8

1980-89

25PRE-1980

9

2010+

22000-

093

199 0-99

91980-89

5PRE-1980

100+ UNIT MULTIFAMILY PROPERTY ANALYSIS

10 - 99 UNIT MULTIFAMILY PROPERTY ANALYSIS

Q1 2020 Transactions by Year Built# of Transactions Avg Price/Unit Avg Price/SF

2010+

2000-09

1990-99

1980-89

Pre-1980

9 $273K $279

2 $208K $215

3 $219K $217

9 $133K $185

5 $126K $181

Total Sales Volume

Price/Unit

Price/SF

Year Built

$1.21B

$179,424

$224.76

1996

Q1 2020 Q1 2019INCREASE/DECREASE

TOP 3 TRANSACTIONS BY PRICE/UNIT (100+)

West SixthTempe, 375 Units | $123,000,000$328,000/Unit | $319.91/SF | Built 2011

Arista at OcotilloChandler, 211 Units | $65,000,000$308,057/Unit | $268.27/SF | Built 2019

Broadstone OsbornPhoenix, 200 Units | $60,000,000$300,000/Unit | $351.26/SF | Built 2019

Q1 2020 Transactions by Year Built# of Transactions Avg Price/Unit Avg Price/SF

2010+

2000-09

1990-99

1980-89

Pre-1980

1 $225K $189

1 $311K $220

2 $160K $152

8 $147K $166

25 $124K $164

Total Sales Volume

Price/Unit

Price/SF

Year Built

$186M

$144,296

$167.64

1974

$120M

$110,892

$135.58

1972

$2.03B

$153,368

$180.39

1991

Q1 2020 Q1 2019

AV

ER

AG

EA

VE

RA

GE

INCREASE/DECREASE

TOP 3 TRANSACTIONS BY PRICE/UNIT (10-99)

Dolce VillagioTempe, 37 Units | $11,500,000$310,811/Unit | $220.49/SF | Built 2007

The Presidio ApartmentsMesa, 71 Units | $16,000,000$225,352/Unit | $188.53/SF | Built 2020

Arcadia PalmsPhoenix, 34 Units | $6,700,000$197,059/Unit | $275.36/SF | Built 1964

-40.5%

+17.0%

+24.6%

+5 Yrs

+54.3%

+30.1%

+23.6%

+2 YrsNUMBER OF

TRANSACTIONS BY YEAR BUILT

NUMBER OF TRANSACTIONS BY YEAR BUILT

1 2010+

2

11990-99

2000-09

ABIMultifamily.com 03Phoenix MSA Q1 2020 Report

ARIZONA MOBILE / MANUFACTURED HOUSING PARK (MHP) ANALYSIS

PHOENIX MSA TUCSON MSA OTHER AZ MSA

Transaction Volume (Q1 2020) $15,000,000 $0 $0

Transaction Volume (Q1 2019) $0 $6,401,540 $0

Avg Sales Price / Space (Q1 2020) $44,118 -- --

Avg Sales Price / Space (Q1 2019) -- $45,401 --

Transaction Volume (Q1 2020) $57,082,000 $5,450,000 $0

Transaction Volume (Q1 2019) $47,630,000 $6,050,000 $0

Avg Sales Price / Space (Q1 2020) $66,998 $42,570 --

Avg Sales Price / Space (Q1 2019) $38,411 $12,983 --

Total Transaction Volume (2020 YTD, 50+) $72,082,000 $5,450,000 $0

Number of Transactions (2020 YTD, 50+) 12 2 0

MHP SALES VOLUME (50+)

AGE R

ESTR

ICTED

/55+

FAMI

LY

PHOENIX MSA TUCSON MSA OTHER AZ MSA

Total Spaces 83,737 22,348 18,818

Age Restricted/55+ 58,830 12,039 9,166

Family 24,907 10,309 9,572

MHP INVENTORY (50+)

INVE

NTOR

Y

ABIMultifamily.com04 Phoenix MSA Q1 2020 Report

Under Construction

Total # of Units: 19,730

Total # of Properties: 79

PlannedTotal # of Units: 23,347

Total # of Properties: 93

T O T A L U N I T I N V E N T O R Y

1 0 + U N I T P R O P E R T I E S : 3 3 5 , 0 0 6

5 0 + U N I T P R O P E R T I E S : 3 1 0 , 9 8 3

7,261

8,644

7,663

3,281

5,431

3,683

2,751

6,902

5,003

9,315

2,593

615

1,668

3,569

4,527 4,661

7,912 7,7858,118

8,940

1,399

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

20 Year Average: 5,557

©

Recently Completed(Q1 2020)

Total # of Units: 1,399

Total # of Properties: 6

1. Encanto Cactus Park | 53 Units

2. Villa Vita | 183 Units

3. Parc South Mountain | 258 Units

4. Metro 101 | 259 Units

5. Riata | 300 Units

6. San Piedra | 346 Units

COMPLETED CONSTRUCTION

PHOENIX MULTIFAMILY CONSTRUCTION PIPELINEQ1 2020

* Project Units Delivered. Project units delivered is based on when the total project is completed, not as individual buildings/units are delivered

PRE-LEASE ABSORPTION RATE

11Units/Property/Month

(Q1 2020 Avg)

ABIMultifamily.com 05Phoenix MSA Q1 2020 Report

ABI GEONEWS: PHOENIX MSA - SELECT NEWS

City of PhoenixCity Council Approves Funding for Affordable Housing and Continuing Light Rail Expansion

Phoenix CouncilPhoenix embarks on $3B bioscience capital projects, creating 7,000 jobs

Banyan ResidentialLuxury Multifamily Proposed for 54th St & Washington

Phoenix CouncilA development boom aims to transform Downtown Phoenix into an urban mecca

City of PhoenixPhoenix grapples with some of nation's fastest-rising rents

John Burns Real Estate ConsultingReport: The Percentage of People in Phoenix who can Afford a Home

Life Care Services | SagewoodSagewood Launches $100 Million Phase II

ABI | ABI in the News100-Plus Unit Apartment Sales Pick Up in Phoenix

Urban Communities LLC Phoenix workforce housing development planned for Arcadia area

Nacero Inc.Nacero $3B Casa Grande Plant Will Create 2,000 Construction Jobs

ABI | ABI in the NewsHow the coronavirus is slowing phoenix metro

True North Studio23-Story High-Rise Planned for Downtown Phoenix 'Opportunity Zone'

12

11

Regional

Regional

8

Regional

Regional

5

4

Regional

2

Regional

CLICK NEWS ARTICLES BELOW TO READ

ABIMultifamily.com06 Phoenix MSA Q1 2020 Report

BY: DREW RICCIARDI, RESEARCH MANAGER

COVID-19 Impact on MultifamilyCOVID-19 has engulfed the globe before our very eyes. Only a couple months ago, our nation’s economic markets were robust, multifamily development was on pace for a healthy year, and job growth continued a consistent rise. Now, with the economy experiencing a degree of turbulence, the multifamily industry observes from a daunting position of uncertainty.Will renters be able to pay their rent? New data is beginning to help diminish that position of uncertainty. According to the National Multifamily Housing Council’s latest Rent Payment Tracker data, 80% of Phoenix MSA renters paid in April. In May, 86.2% paid their landlords compared to 89% in May 2019. That is great news relative to our current unprecedented events. Government aid seems to be a major factor in the increase in rent paid and the fact that rent and home payments are typically a person’s first priority. The finish to June and July rent payments will be even more telling for multifamily.

The Government Steps in to HelpThe U.S. Government helped assist the common tax-paying American by passing the CARES Act with a one-time stimulus check (depending on income) of $1,200 for individuals, $2,400 for married couples, $500 for each dependent child, and an extra $600 a week for unemployment assistance until July 31. The FED acted by cutting interest rates for short-term lending down to near zero along with a number of programs to improve money markets, incentivize businesses not to lay off employees, and to add more credit facilities.State and local governments have imposed moratoriums on evictions while providing rental payment assistance programs. Industry leaders are lobbying for more financial assistance for renters. Amherst, a data and analytics firm, projects American renters may need up to $12 billion each month for the next three to six months.The downside of all this new money being injected into the

economy is inflation. In the immediate future, goods and materials will be less expensive because of a surplus of current existing inventory. Once current inventory is sold off, the cost to produce the next production runs of goods and materials will increase.

Risk is a Component of an Interest Rate Multifamily lending has also felt the repercussions of this pandemic. An interesting roundtable discussion with industry leaders provided by Multifamily Executive Magazine helped paint a picture of lending moving forward. “The silver lining is multifamily is one of the few property types that has somewhat functional capital markets with a majority of the financing liquidity being provided by the agencies like Freddie Mac, Fannie Mae, and the Department of Housing and Urban Development,” says Robert Hart, President and CEO of TruAmerica. “Due to uncertainty of future rent projections, new household information, and occupancies because of the pandemic…the agencies and most banks are quoting higher spreads, using index floors, and requiring mortgage payment escrow reserves for up to twelve months depending on the type of loan requested.”CEO and Chairman of Waterton, David Schwartz, stated, “Agency lenders are still active, but spreads are up and underwriting is factoring in reality, banks will still lend, but on a relationship basis, no other real lending out there…debt funds are gone, CMBS is gone, and insurance companies are more or less out of the market.”On the construction side, development has been impacted significantly. Severity varies state by state, but factors like a disruption in the supply chain, lack of new construction financing, the closing of local government offices, and the delay of public planning & zoning hearings have complicated the entitlement and approval process. This does not help the existing housing shortage the U.S. currently faces.It is abundantly clear that opening the country’s economy is critical to avoid unemployment, multifamily’s largest threat.

ABInsight ®

The Multifamily Market & Initial Repercussions of

COVID-19COVID-19

ABIMultifamily.com 07Phoenix MSA Q1 2020 Report

THE MULTIFAMILY MARKET & INITIAL REPERCUSSIONS OF COVID-19

Where We Were Going vs. Where We Are Now At the start of 2020, the common consensus around the industry (including myself) was that we were in store for another extraordinary year for multifamily.

In my 2019 Year-End Report, I spoke about the Fannie Mae 2020 Multifamily Forecast having a bright outlook. According to Fannie Mae researchers, “driven in part by consumer spending, job growth, and low interest rates, the 2020 outlook for the multifamily sector remains positive.”

CBRE projected national multifamily deliveries to be the second most units delivered in the past twelve years at 280,000 units.

In the Phoenix MSA, the combination of rent growth, healthy occupancy rates, lower cost of living, and high renter demand contributed to the positive outlook in 2020. Newmark Knight Frank Research had Phoenix leading all markets in multifamily total returns in 2019.

According to the National Multifamily Report by Yardi Matrix, Phoenix rents increased 7.6% year over year in March, just as COVID-19 hit, leading the entire nation in rent growth.

New construction deliveries were projected to outperform the record year witnessed in 2019 to help address the major supply/demand imbalance felt in the Valley (demand outpacing supply).

Now that the effects of COVID-19 have set in, the 2020 multifamily outlook has been altered. Investors are being patient while this plays out. The majority of listings have been taken off market, numerous deals have fallen out of escrow, and buyers are demanding prices be cut 5%-15% due to the risk factor. Rent growth and occupancy rates will eventually drop.

The development pipeline is full of planned and under-construction properties, but the timeline for the completion of these projects is unclear. Affordable housing inventory remains a problem, especially considering affordable housing demand is likely to spike.

Moving forward, developers may consider co-working to be multifamily’s hottest new amenity, with the recent surge of corporate offices trending towards remote working.

Arizona’s stay-at-home order expires May 15th with some “non-essential” retail operations, like salons and restaurants, opening gradually before that date. Some states have already begun phase one of opening their economies. I foresee states to slowly start to open, with Northeast markets trailing behind.

Unemployment numbers will begin to drop with businesses opening their doors to the public again. That said, Phoenix Economic Development Director Christine Mackay believes a startling one in four small businesses in the city may never reopen.

The real effects will be highlighted in Q2 2020 data. As long as the nation does not experience a major setback, investors’ and

lenders' fear of the unknown will subside. The economy pre-COVID-19 was healthy as can be, and because of that, there is a great chance that the Coronavirus Recession will be shaped more like a “V” or a small “U” rather than an “L”. Optimistically, the path to normality could return around the start of 2021.

Phoenix Market Metrics: By the NumbersQ1 2020 witnessed a healthy start in the first two months with a poor finish in the month of March as a result of the initial effects of COVID-19.For 10-99 unit properties, Q1 saw a transaction volume of approximately $186 Million, which represented a 54.3% Year-over-Year Increase from Q1 2019. In the 100+ unit category, Q1 brought in $1.21 Billion, down 40.5% YoY.Average Price-Per-Unit amounts were up in the 10-99 segment, rising 30.1% YoY to $144,296, and up 17.0% to $179,424 for 100+. These translated to an Average Price/SF of $167.64 in 10-99 (up 23.6%) and $224.76 (up 24.6%) in 100+.Inventory age saw an increase Year-over-Year, with Average Year Built for 10-99 being 1974, versus 1972. Average Year Built in 100+ was 1996, compared to 1991 in Q1 2019.The market’s occupancy rate took a hit. Q1 occupancy for 10+ units was 95.1%, a decrease of 0.4% YoY. Average rent was $1,235, up $94 (8.2%) from last year. Phoenix MSA demographics continued their solid trends. The Census estimate of total population was 4,857,962. The unemployment rate finished the quarter at 4.7%, according to Bureau of Labor Statistics numbers.Median Household Income was $64,427, and Per Capita Income came in at $32,482.In the realm of new construction for 50+ unit properties, 1,399 units were delivered across 6 projects to start the year. A disappointing number considering 2,587 units were delivered by this time last year.Currently, an estimated 23,347 units are in the Planning stages across 93 properties. A total of 19,730 units were listed as Under Construction in 79 properties.Pre-lease absorption rates are lower this quarter at a rate of 11 units/property/month. Total Unit Inventory for 50+ unit properties came in at 310,983.Across the MSA, 50+ unit inventories by city were:

• Phoenix: 139,317

• Mesa: 38,658

• Tempe: 34,726

• Scottsdale: 28,657

• Glendale: 24,528

AB Insight ®

ABIMultifamily.com08 Phoenix MSA Q1 2020 Report

SCOTTSDALE TOWNHOUSE APARTMENTS3212 North 70th StreetScottsdale, AZ 85251

Price: $6,050,000Units: 25Year Built: 1973

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LEADING MULTIFAMILY BROKERAGE TEAM IN THE WESTERN US200+ YEARS OF COMBINED MULTIFAMILY BROKERAGE EXPERIENCE

SEASONED ADVISORS WITH REGIONAL INSIGHTCOLLABORATION & COOPERATION

DISCLAIMER © 2020 ABI Multifamily | The information and details contained herein have been obtained from third-party sources believed to be reliable; however, ABI Multifamily has not independently verified its accuracy. ABI Multifamily makes no representations, guarantees, or express or implied warranties of any kind regarding the accuracy or completeness of the information and details provided herein, including but not limited to the implied warranty of suitability and fitness for a particular purpose. Interested parties should perform their own due diligence regarding the accuracy of the information. SOURCES: ABI Research / Bureau of Labor Statistics / Census Bureau / YARDI Matrix / Vizzda / US Chamber of Commerce / RED Comps / ARMLS

100+ UNIT PROPERTIES 10-99 UNIT PROPERTIES

NOTABLE RECENT ABI MULTIFAMILY TRANSACTIONS

MONTEREY VILLAGE APARTMENTS4707 East McDowell RoadPhoenix, AZ 85008

Price: $26,450,000Units: 252Year Built: 1983

LAS HADAS APARTMENTS9240 East Redfield RoadScottsdale, AZ 85260

Price: $19,000,000Units: 110Year Built: 1987

FERNWOOD COURT APARTMENTS15430 North 25th StreetPhoenix, AZ 85032 Price: $6,150,000Units: 32Year Built: 2010

SAN DIEGO OFFICE 1012 2nd Street, Suite 100 Encinitas, CA 92024

858.256.7690CA Lic #02015648

PHOENIX HEADQUARTERS5227 North 7th Street Phoenix, AZ 85014

602.714.1400

SACRAMENTO OFFICE2251 Douglas Blvd, Suite 115 Roseville, CA 95661

916.330.4040CA Lic #02015648

TUCSON OFFICE1650 North Kolb Road, Suite 230 Tucson, AZ 85715520.265.1945

APARTMENT BROKERAGE & ADVISORY FIRMABI Multifamily is a brokerage and advisory services firm that focuses exclusively on apartment investment transactions. The experienced advisors at ABI Multifamily have completed billions of dollars in sales and thousands of individual multifamily transactions.

ABI Multifamily incorporates a global approach with regional real estate expertise to successfully complete any multifamily transaction, regardless of size and complexity.

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ABIMultifamily.com Phoenix Headquarters: 5227 North 7th Street, Phoenix, AZ 85014 Tel: 602.714.1400